The future impact of Digbeth renaissance
With over 4500 apartments now planned or being built in Digbeth there has been concern voiced regarding whether there will be an impact of this volume of new residences coming into the City on the local plus wider City Centre housing market.
The coffee shop chatter from agents & landlords alike has questioned the absorption within Birmingham of this number of flats plus the impact on existing rentals locally, with a wider concern about the other locations close to the City core.
As focussed agents we certainly have no concerns regarding the absorption because there is undoubted demand for more accommodation. The demand is coming from professionals & students, both local plus international, alike. This volume of stock also will not arrive in a lump but will come through as individual buildings are finished, being probably 80-150 units at a time. This volume will also not all come to the local sales market as a substantial number are already being bought by institutional investment companies buying for long term investment, or are being bought by foreign & expatriate individuals.
The bigger issue is one of whether the rental prices sought could impact against the rest of the City. Our experience from 2003-2007 was tenancies shortening across the market as tenants jumped from one brand new developments into another as they completed. This time whether in fact a Jewellery Quarter based tenant will move south to Digbeth is questionable but if the landlords start becoming very competitive as they might do to initially fill the apartments the impact will affect landlords across the City.
A recent example of a newly completed block has highlighted how individual landlords might react as they compete against other flats within their scheme to secure initial tenants. The Bank in the Convention Quarter was offered for sale with agents quoting £1200-£1300 pm month income for the investor buyers. In reality, a number of landlords have offered the apartments for let at £1050-£1100pm. Clearly going forward the anticipation is that the prices will rise as the number of immediate competitors diminishes. In Digbeth however the number of immediate competitors will be considerably more because some of the individual planned blocks are 300-600 units each.
In order for new landlords, institutional or otherwise, to secure tenancies in what is an up & coming location the rents will have to be highly competitive, if not discounted to the open market. It is this price differential which will fill up the apartments and this discount which will have an effect on competing apartments, particularly those in secondary locations which currently are achieving high rents.
Whilst the Digbeth location is fundamentally sound it will inevitably take off further as a residential address competing with the Convention & Jewellery Quarters as we move towards 2026 with the opening of HS2, & helped on route by the tram coming into Digbeth High Street. Looking towards London we have witnessed the same renaissance happening around St Pancras & Kings Cross stations in recent years. The area will not change overnight but it will change dramatically over time.
